Consumer Confidence Edges Up in May (Includes Take from Dr. Joe Webb)

Wednesday, May 28, 2003

May 27, 2003 -- The Conference Board's Consumer Confidence Index, which increased sharply in April, posted a moderate increase in May. The Index now stands at 83.8 (1985=100), up from 81.0 in April. The Expectations Index rose to 94.4 from 84.8. The Present Situation Index, however, fell to 67.9 from 75.2.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by NFO WorldGroup, a member of The Interpublic Group of Companies. The cutoff date for May’s preliminary results was May 20th.
“The post-war euphoria experienced last month has quickly given way and consumers’ focus has returned to matters on the home front,” says Lynn Franco, Director of The Conference Board’s Consumer Research Center. “Labor market conditions continue to be of concern, but consumers anticipate a turnaround in the coming months. While the overall Index improved moderately, the decline in the Present Situation Index suggests consumers will continue spending at current levels.”
Consumers' assessment of current conditions was less favorable than last month. Those rating present business conditions as “bad” rose to 28.4 percent from 23.9 percent. Those rating conditions as “good” remained virtually unchanged at 16.1 percent. Labor market conditions also deteriorated. Consumers reporting jobs are hard to get jumped to 32.6 percent from 29.4 percent. Those claiming jobs are plentiful slipped to 12.6 percent from 13.0 percent.
Consumers’ short-term expectations posted another significant improvement. Those anticipating an improvement in business conditions over the next six months rose to 22.8 percent from 18.9 percent. Consumers anticipating conditions to worsen fell to 9.7 percent from 12.3 percent.
The employment outlook was also more favorable. Consumers anticipating more jobs to become available increased to 17.8 percent from 16.4 percent, while those expecting fewer jobs fell to 17.6 percent from 20.9 percent. The proportion of consumers anticipating an increase in their incomes slipped to 17.0 percent from 17.2 percent.
=====
Free WTT Analysis: Below is a quick take on this news from Dr. Joe Webb. Premium Access Members can view more analysis in his weekly column on Friday, appropriately called “Fridays with Dr. Joe”.
“Consumer expectations rose again overall, but there was still concern about current conditions, according to the Conference Board. There is growing optimism among consumers, and we hope that it starts infecting business investment intentions.
“Good new home sales figures were released as well (+1.7%), better than economists expected, which may be a better indicator of consumer confidence at this point than the Conference Board's index. No one buys a house unless they're confident in their ability to pay for it, or at least that's what they tell the banks.
“I continue to expect sluggish unemployment, with the overall economic environment starting to improve more measurably later this year. I'll be writing about the recovery and what it means to print over the next few weeks.”